UK third party video game developers face significant challenges. These challenges and their affects are explored and presented. Operational profitability of major UK third party video game developers is analysed. The impact and affect of the industry standard business model (Publisher) is examined. Alternative business models (Hollywood and Outsourcing) are explored. Benefits, affects, effects, advantages, and disadvantages of extent and alternative business models are presented through value chain analysis. Opportunities, strategies, and tactics for improved financial, operational, and competitive performance of third party video game developers are presented.
The ambition of this project is to provide a piece of work that has a direct benefit to the UK video game industry, specifically to UK third party video game developers. This report is not envisioned as a final and definitive solution to the significant challenges facing third party UK video game developers, but as a start point for continuing research, debate, dialogue, and problem solving regarding the industry’s list of considerable challanges.
Executive Summary
The aim of this project is to explore the cause and effects of the publisher business model on UK third party video game developers.
Publishers and platform holders have used their industry wide scale, power, and control to marginalise third party video game developer operational capabilities forcing them to become little more than video game manufacturing factories. Third party developer’s work under extremely unprofitable operational conditions, developing licensed video game products for publishers and platform holders.
In return for the funding necessary to produce video game products, third part developers sign away ownership rights to their Intellectual Property, and the usage rights to their technology, assets (art, charters, stories, and backgrounds), code, and other components of the video game projects they produce.
In this manner they sign away most of the intrinsic value contained within their organisations and subsequently their ability to remain profitable, create long term sustainable competitive advantage, and the financial reserves necessary to reinvest in growth opportunities.
The existing publisher business model and the combined effects of numerable other challenges facing third party video game developers limits the long term operational pathways available to UK third party video game developers. Developers are forced into closure, sell themselves to a publisher or platform holder, or remain unchanged within an industry that is straining under the pressure of an inherently detrimental and broken business model.
Publishers are led by an unrelenting search for hit products, profits, and cold hard business objectives. They are huge publicly listed companies with a primary objective of returning value to their share holders. In most cases even the best and most well wishing publishers use their industry dominance to squeeze profit margins from third party developers and the video game products they produce. This pressure has had a dramatically detrimental effect on the operational capabilities, structure, and financial performance of third party video game developers.
Publishers are not entirely to blame. It is only now that the industry is beginning to crack under the weight of twenty million dollar development budgets that the inherently broken publisher business model is beginning to strain, buckle, collapse, and affect all major agents of the video game industry (licence holders, platform holders, publishers, developers, distributors, and retailers).
Developers have allowed publishers and platform holders to take control of the industry year by year, project by project, and contract by contract. Their lack of vision, planning, foresight, strategies, tactics, management, and business skills have left them in this harrowing state of affairs.
Third party developer’s inability to seek alternatives to the publisher model throughout the years has seen many famous UK developer’s permanently close their doors, others have been sold to publishers or platform holders, and the remaining few struggle on against a growing body of challenges, struggling to operate in a continually harsher operating environment.
If developers do not seek to address the effects of long term exposure to the detrimental publisher model and seek to find new, alternative, strategies, tactics, and business models no less than the long term survivability of UK third party video game developers is at stake.
The Publisher Business Model and UK Third Party Video Game Development: Challenges, Effects, Strategies and Tactics
Abstract
UK third party video game developers face significant challenges. These challenges and their affects are explored and presented. Operational profitability of major UK third party video game developers is analysed. The impact and affect of the industry standard business model (Publisher) is examined. Alternative business models (Hollywood and Outsourcing) are explored. Benefits, affects, effects, advantages, and disadvantages of extent and alternative business models are presented through value chain analysis. Opportunities, strategies, and tactics for improved financial, operational, and competitive performance of third party video game developers are presented.
The ambition of this project is to provide a piece of work that has a direct benefit to the UK video game industry, specifically to UK third party video game developers. This report is not envisioned as a final and definitive solution to the significant challenges facing third party UK video game developers, but as a start point for continuing research, debate, dialogue, and problem solving regarding the industry’s list of considerable challanges.
Executive Summary
The aim of this project is to explore the cause and effects of the publisher business model on UK third party video game developers.
Publishers and platform holders have used their industry wide scale, power, and control to marginalise third party video game developer operational capabilities forcing them to become little more than video game manufacturing factories. Third party developer’s work under extremely unprofitable operational conditions, developing licensed video game products for publishers and platform holders.
In return for the funding necessary to produce video game products, third part developers sign away ownership rights to their Intellectual Property, and the usage rights to their technology, assets (art, charters, stories, and backgrounds), code, and other components of the video game projects they produce.
In this manner they sign away most of the intrinsic value contained within their organisations and subsequently their ability to remain profitable, create long term sustainable competitive advantage, and the financial reserves necessary to reinvest in growth opportunities.
The existing publisher business model and the combined effects of numerable other challenges facing third party video game developers limits the long term operational pathways available to UK third party video game developers. Developers are forced into closure, sell themselves to a publisher or platform holder, or remain unchanged within an industry that is straining under the pressure of an inherently detrimental and broken business model.
Publishers are led by an unrelenting search for hit products, profits, and cold hard business objectives. They are huge publicly listed companies with a primary objective of returning value to their share holders. In most cases even the best and most well wishing publishers use their industry dominance to squeeze profit margins from third party developers and the video game products they produce. This pressure has had a dramatically detrimental effect on the operational capabilities, structure, and financial performance of third party video game developers.
Publishers are not entirely to blame. It is only now that the industry is beginning to crack under the weight of twenty million dollar development budgets that the inherently broken publisher business model is beginning to strain, buckle, collapse, and affect all major agents of the video game industry (licence holders, platform holders, publishers, developers, distributors, and retailers).
Developers have allowed publishers and platform holders to take control of the industry year by year, project by project, and contract by contract. Their lack of vision, planning, foresight, strategies, tactics, management, and business skills have left them in this harrowing state of affairs.
Third party developer’s inability to seek alternatives to the publisher model throughout the years has seen many famous UK developer’s permanently close their doors, others have been sold to publishers or platform holders, and the remaining few struggle on against a growing body of challenges, struggling to operate in a continually harsher operating environment.
If developers do not seek to address the effects of long term exposure to the detrimental publisher model and seek to find new, alternative, strategies, tactics, and business models no less than the long term survivability of UK third party video game developers is at stake.
The Publisher Business Model and UK Third Party Video Game Development Challenges Effects Strategies and Tactics